Friday, September 23, 2011

Class Warfare?

Here is Elizabeth Warren doing a pretty good job at a populist description of the social contract (as she sees it):



I wonder how this will resonate? What do you think, do you buy it? [HT: The Washington Post]

10 comments:

Jeff Alworth said...

It's a mission statement more than a policy comment. A lot of what she's talking about gets paid by local government--which is far more popular than the federal govt. But as a mission statement goes, it's a perfect case for the liberal view. And therefore I buy it.

Whether the indies buy it is another--and more important--matter.

Cralis said...

The problem here is that if you take what she says at face value, you would be led to believe that someone who works hard and makes a lot of money doesn't pay anything towards social costs. That is not only dishonest, but completely untrue.

http://visualizingeconomics.com/2010/02/12/how-much-taxes-are-paid-by-the-poor-middle-class-and-rich/

What she isn't telling you, and what really galls the organic social mindset, is that the rich don't generally have much income. They have wealth that generates wealth. The reason they feel safe taxing 40%, 60%, 90% of the income of the rich is that they know they aren't touching their own wealth.

But there is a trickle down effect where this starts to affect professionals who have high amounts of income - such as doctors - who may suddenly decide that their profession no longer pays enough - due to excessive taxation - to be worth doing.

This is very similar to the reason that income taxes DROPPED in Oregon after Measure 66. Top earners moved away or played harder with their taxes.

http://washingtonexaminer.com/blogs/beltway-confidential/2010/12/big-tax-hike-oregon-results-substantially-less-revenue

Nearly all studies show strong indicators that increasing taxes lowers revenue and hurts the middle class and poor, while decreasing taxes increases revenue and helps everyone.

This following video sums up the problem: we can't possibly tax our way out of debt. We need to stop trying to pay for everything for everyone. War aside - from the Revolutionary War to the Iraq War, you can't fit them into any kind of a budget unless we want to become a war state - we have to be more realistic. At least she recognizes that with her comments on the trillion-per-year on medicare/medicaid she mentions.

http://www.youtube.com/watch?v=661pi6K-8WQ

So no, I don't buy what she says. The rich already pay more than everyone else. It is the tax system that is broken, not the percentages.

Elijah said...

I don't buy it. Or, rather, I dismiss it as inherently political. The underlying implication is that the successful entrepreneur has risen to prosperity on labor and infrastructure that was paid for by others, while individually contributing little to the common good (or, at least, no more than anyone else).

Now, reasonable minds can differ as to how much person A should contribute vis-à-vis person B. And, for the record, I don't have a problem with notion that those that are able to should pay more. However, it's disingenuous to imply that the wealthy aren't already bearing a disproportionate share of the tax burden.

I'd love to hear a politician say / admit something along the lines of, "You know what (wealthy persons)? You already pay more tax than the average American, whether measured as a percentage of income or outright tax burden. Nevertheless, we need you to pay even more because you are the only ones capable of doing so."

Leave the philosophy (fairness discussion) and politics out of it.

Mitchell S. OSU said...

I also don't buy this it was purely political she didn’t give any hard facts on what she wanted done. It seemed to me that she was just trying to get hype out of the crowd. All she really said was she wants people who make more money to pay a big hunk of their money? Like the others have said they ALREADY do. It is common knowledge that the wealthiest 10% of people in this nation pay way more than 50% of the taxes. Here is a list of FACTS from the 2007 tax data.

1. The top-earning 50 percent of taxpayers reported 87.7 percent of all adjusted gross income (AGI) and paid 97.1 percent of total income taxes.

2. The top-earning 10 percent of taxpayers reported 48 percent of all AGI and paid 71.2 percent of total income taxes.

3. The top-earning 5 percent of taxpayers reported 37.4 percent of all AGI and paid 60.6 percent of total income taxes.

4. The top-earning 1 percent of taxpayers reported 22.8 percent of all AGI and paid 40.4 percent of total income taxes.

5. At the bottom of the income scale, the calculator told me that the lowest-earning 50 percent of taxpayers reported 12.3 percent of all AGI and paid 2.89 percent of total income taxes.

If you want more tax statistics check out this link.
http://blog.pappastax.com/index.php/2010/09/05/the-richest-10-pay-71-of-federal-income-taxes/

Patrick Emerson said...

Just to be clear, I think of it as inherently political. I didn't meant to ask about the merits of the argument economically (though it is perhaps the more interesting question). What I am interested in is how people react to economics arguments dressed up in populism. Are the effective, do they hit home?

It is empirically clear that inequality in most reasonable measures in increasing in the US and has been for some time, I am very curious how this is informing the national psyche. Is this something that is going to become a political hot button topic?

Unknown said...

I think it hit home for the people in the audience because she was probably speaking to people who have the same views as her to begin with. She was using an economic argument to gain political support. I think this really hits home for people who want to believe everything she says because of their prior similar beliefs; however she is using questionable economic arguments. Such as implying that the business man had not also helped pay to pave the roads, pay for education, and police force etc. etc. Politicians know just how to phrase their arguments to mislead an audience into believing they are right.
I do not think that the inequality of our system today will become a hot topic because the facts I shared before are common knowledge and have been for some time. It seems politicians such as Elizabeth Warren know just what to say to keep this out of the national psyche.

Jeff Alworth said...

Not that anyone will read this comment, but wow. People failed to understand her comment and then went immediately into their own spin cycle.

Of COURSE the wealthy pay the most income tax. If they command an enormous share of the total wealth, they will naturally pay more of the taxes. But there's all kind of data out there showing that the tax code is only marginally progressive and worse, strongly favors investment over actual work. (Capital gains are taxed lower than income, and payroll taxes stop after $106k.)

Those are actual data points, not spin. Whether a person believes the public policy is where it should be is another matter, but let's not pervert the data.

Elijah said...

I read it and, because I don't really know to which individual(s) your rebuke was addressed, will respond. You note the following:

[T]here's all kind of data out there showing that the tax code is only marginally progressive and worse, strongly favors investment over actual work.

To your first point, the U.S. actually has the most progressive tax system among OECD nations. What this means is No Country Leans on Upper-Income Households as Much as U.S.

As to your second point, I'm not sure how or why anyone would disagree. One need only look at Section 1 of the Internal Revenue Code (and subsequent updates) to reach this conclusion. The implication you seem to be making is that this is bad policy. While I'm loathe to debate fairness, I will submit (1) U.S. Capital Taxes Among Highest in the OECD, and (2) (other) data suggests that a low rate of tax on capital gains increases capital investment and new business formation.

Allow me to conclude by saying, Those are actual data points, not spin. Whether a person believes the public policy is where it should be is another matter, but let's not pervert the data.

JHowe said...

I actually think the message will. Income inequality isn’t suddenly going to reverse course or slow; it will likely continue to increase. Populous messages resonate when people see excessive inequality. Social Security was started when half of the elderly lived in poverty. When Medicare was created half of the elderly didn’t have medical coverage. How is it sustainable when he poor and middle class are going to feel more pain from budget cuts and income inequality continues to increase? Spending cuts are going to feel a lot like a tax increase to most Americans.

So few people (the top 1%, 0.1%, 0.01%) are taking most of the increase in income over the last 30 years that there should be concern about the disincentive for the other 99% to keep contributing to increase in productivity. Why go to college if all it gets you is a pile of student loans? Why bother to increase your skills if it doesn’t lead to a higher paying job? Why innovate/work harder/be more productive if the only benefits are the CEO’s bonus and the stock price?

Jeff Alworth said...

Elijah, thanks to Patrick's latest post, I found my way back here and see someone did respond. I'll be brief again because I assume this really will be the last anyone sees of it.

Anyway, that's a badly misleading stat--and not surprising since it comes from a highly ideological group. In fact, all it discusses are income taxes.

I don't have the time or inclination to dig out contradictory data on your second point, but obviously, you reach a point of vanishing returns. I'd say that point is far higher than 15%. The economy would seem to confirm it.